When you borrow money, your lender will give you a timeline of when you need to pay back the cash. Student loans, credit cards, mortgages and auto loans – all of these come with the expectation that you will submit a minimum monthly payment prior to a certain deadline. As long as you make the cutoff for those payments, your account will be in good standing.

However, if the deadline passes without any money going to the lender, you’ll wind up with a delinquent account. As you work to maintain your financial wellbeing, it’s important to understand what is classified as delinquent, what it means for your credit score and what to do to avoid serious consequences.

What is a delinquent account?

When you hear the word delinquent used to describe a person, you’ll typically associate it with someone who has broken the law. In the financial world, being delinquent is similar: The borrower has broken the terms of his or her contract to pay the money back.

Many consumers have delinquent accounts. For example, around 3.8 percent of homeowners are delinquent by at least 30 days with their mortgages.

Different levels of delinquency with different consequences. A delinquent account might come with something as simple as a late fee or something as terrifying as losing your house or your car.

When is a borrower reported as delinquent?

There is a difference between being delinquent – which you technically are as soon as the payment deadline is past – and being reported as delinquent.

If you miss a payment that is due today but manage to submit it tomorrow, your account will likely not be reported to any of the credit bureaus. You will probably need to pay a late fee – although, depending on the lender and your history, you might even be able to get that fee waived if it’s your first missed payment.

Some types of loans offer more generous buffers for reporting your failure to pay, too. For example, student loan borrowers with federal student loans aren’t reported as delinquent until they have failed to make payments for 90 days.

Time since last payment Consequence
Less than 30 days You will likely pay a late fee that will depend on the amount of the loan.
More than 30 days You will pay a late fee, plus a report will be set to the three major credit bureaus.
More than 60 days You will pay more late fees, and you will receive phone calls and letters that are working to track down the money.
More than 90 days Your account may be closed if it’s a credit card or personal loan, and if it’s a home or auto loan, you could receive a notice of the intention to foreclose or repossess the vehicle.
More than 120 days Your name is passed on to a debt collection agency, and you can expect very aggressive tactics to track you down. The agency may even call your friends or family, too. If the debt involves your home or your car, you are dangerously close to losing the property – if you haven’t already.

How does a delinquent account affect your credit score?

One of the most critical pieces of your credit score is maintaining a history of on-time payments. In fact, your payment history makes up 35 percent of your overall credit score. So, if you have delinquent accounts, your score can take a serious hit – particularly if the delinquency is extending past the 30-day mark.

Being a couple of months late on your payment might sound like a short window of time, but the impact of that bad decision can linger for much longer. A delinquency can be on your credit report for up to seven years.

So, if your credit card account is reported as delinquent in April 2022, you could be dealing with the fallout until April 2029. Think about that: If you fail to make a payment on your credit card this month, that negative mark might still be on your credit report years from now when you’re trying to buy a home. If it continues to drag down your credit score, you will have to deal with paying a higher interest rate – or worse, not being approved for the loan.

How can you avoid delinquent accounts?

If you’re staring down the possibility of letting one of your accounts slip into delinquent territory, you can take action to protect yourself from doing damage to your credit. Consider these steps to steer clear of the consequences of having a delinquent account:

Consolidate your debts

If you’re carrying debt across multiple accounts, you can look into debt consolidation loans. These will consolidate your debts into one loan, so rather than juggling different payment dates for all your accounts, you’ll make one payment each month.

If you have a decent credit score, some of these consolidation options come with interest rates that will beat credit cards. However, pay close attention to all the fees and compare a range of loans to see if the costs are worth it.

Tap into your emergency savings account

While an emergency savings account is designed for unexpected situations, that backup cash can play an important role in keeping your account in good standing. If you do use it to pay down this month’s debt, remember to replenish your emergency savings fund as soon as possible and reevaluate your budget to prevent it happening again.

Talk to your lender before the payment date arrives

If the payment due date is looming, call your lender. In many cases, you may be able to qualify for a hardship program – particularly if you are in a challenging situation such as a job loss or a medical emergency. By proactively asking for assistance, you will demonstrate that you are doing all you can to avoid delinquency.

Look at your budget

What expenses can you eliminate to shift some dollars to paying off your debt? Are there memberships or subscriptions that you can cancel to free up more room for your debt payments? Trim all your other costs to try to come up with the payment this month.

Look for debt and credit counseling

The National Foundation for Credit Counseling is a non-profit organization that can help connect borrowers in distress with counseling services to develop strategies for getting on a better financial path. These services can be especially valuable if you are regularly struggling to make ends meet and worrying about your debts.

Consider a debt relief company

If you have exhausted all your options, you may need to hire some help. Debt relief companies can help you avoid the last resort of bankruptcy by negotiating your debts for a smaller payoff.

However, these companies aren’t free. You’ll pay for their services, and some of these companies can be a bit shady. Beware of television advertisements with too-good-to-be-true promises of the ability to eliminate all your debts immediately.

What should you do to remove delinquent accounts from your credit report?

If you wind up with a delinquent account, here’s a rundown of how to get that bad mark removed from your credit report.

  • Write to your lender: If your missed payment was a one-time rarity, consider pleading with your lender. While they don’t have to help you out, a personal letter that details your situation might be able to go a long way.
  • Write to the credit bureaus: If it’s been seven years since your delinquency, the time is up. Review your credit report. If the negative mark is still there, send a letter to each of the three credit bureaus with a request to have it removed.
  • Manage the rest of your credit responsibly: Getting delinquent accounts removed can be tough. If you’re stuck with the mark on your credit report, focus on what’s in your control to help improve your score: making on-time payments with your other bills, keeping your credit utilization ratio low and limiting the number of credit inquiries.

Bottom line

Late payments and delinquent accounts can haunt your financial house for many years. As you work to build your credit history, keeping all your credit accounts in good standing will lay the foundation for your long-term success.

If you are staring at a mountain of bills, now is the time to educate yourself on debt management strategies. Pay it off now, so you can enjoy a debt-free – and stress-free – future.